beginner stock market investing

In the world we live in today, procuring information about anything and everything is just a click away then why should stock market be an exception. But sometimes too much information can be a curse too. Different sources will give completely different and sometimes conflicting ideas on your queries about stock market how to get started. The idea is to take in this information selectively and sieve out whatever works for you.

When you enter the stock market, make sure you are not investing in companies and organizations that you don’t know anything about. Follow the example of the great Warren Buffet, who refused to follow the general trend of the market during the dot com boom and didn’t invest in technology. He might have lost money he could have made but that’s better than losing money from your hand. And in the long run both him and his investors earned enough money to compensate for anything that they could have lost. The lesson here is that get to know a company, its structure, drives and policies before you out your money on them.

Once you have decided on what kind of company you want to invest in browse through the names of market players on message boards, magazines, newspapers etc.

Once you are through this stage, you have effectively sailed through the stock market how to get started phase. After you have short listed companies, when and how to invest money can be quite tricky till you get enough experience to predict the rise and fall of the market. Till then one way to go about it is to keep a look at activities of the insider. An insider is a person who owns a percentage in the company or owns large shares of the same. When he or she is buying/ selling/waiting can help you decide what you want to do with your money.

Of course if the people who are running the company are not sure about its market viability and performance then you have no reason to invest your money in it.

Another useful exercise is to check out the P/E ratio that is price/earning ratio of the company. If a company’s P/E ratio is lower than others in the same sector than it consequently means that they are not doing too well. Technical analysis and charts will also allow you to familiarize yourself with the past, present and future of a company. These charts in diagrammatic form are easy to follow and provide all essential details.

Studying the management team of the company is also helpful in gauging their future prospects and relative strengths when compared to other players in the market. Its analogous to checking out a sports team getting to know the coach will give you a reflection of the state of the team.

These pointers will help you to face your hesitations about stock market how to get started. Familiarize yourself with terms and conditions of the arena you are getting into and do your study work before investing in any and every company.

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Pretty much every investor uses one of three general investment strategies. These are: fundamental analysis, technical analysis and buying and holding the market. A brief examination of each of these techniques will help an investor decide which best suits their personal profile. Fundamental Analysis The most straightforward approach of fundamental analysis is a basic examination of a stock versus the value of the company and its expected future earnings. Based on the company’s financial publications it should be relatively easy to determine weather a stock is undervalued, overvalued or somewhere in-between. The trader assumes that the market price will correct itself and the price per share will consequently go up or down, unless there are any unforeseen events or hidden value traps.

Technical Analysis Using technical analysis, the investor makes an attempt to predict future share prices based on the direction of the market, trading volumes and past prices. This approach assumes that the market and individual stock prices loosely follow discernible patterns, or at least stay within a certain bandwidth of it. Once the beginning of a pattern is identified, the remainder of the pattern can theoretically be predicted, hopefully well enough to yield returns in excess of the general market. Research has shown that solely using technical analysis as your strategy, does not work well. Yet, there are some indicators such as pivot point resistance or support levels that can actually hold up, most likely due to the wide acceptance and adoption of the method under the professional traders.

Buying and Holding the Market The approach of “buying and holding the market” is to have a portfolio that could hold it’s benchmark against the market performance. For this strategy the investor buys a basket of stock that resembles the stock market or the S&P 500 assuming that the overall direction of the market performance is upward. The investor buys a large number of diversified stocks and does not need to buy every single stock in the index, although that could be achieved by buying stocks of an S&P 500 Index mutual fund. This approach can be used as a benchmark performance tool, as no other investment approach is valid unless it’s able to outperform the stock market over the long run. In the event that investment approaches do perform above market performance with the same risk, the difference is called excess return, which represents the added value of the used investment approach.

The strategy you decide to use depends on your conceptual view of the two principal stock market theories. In the light of the efficient market theory, the stock price reflects all publicly available information about the company in question, which results in the trading price coming very close to the true value of the share price. Meaning that on average the price reflects the fair value of the stock, but not all the time, as variations of this price can exist. On the other hand, there’s the school of thought that these prices are unpredictable and too random, and cannot be used to generate excess returns. In that case, there is no point in using the fundamental approach seeking stocks that are selling under their actual value. Alternatively, one could concentrate more on developing a more efficient portfolio, instead of selecting a certain kind of stock. This would be a portfolio that provides returns closest to the market’s return at a specified level of market risk. The investor simply determines the amount of risk that is acceptable and builds the portfolio based accordingly.

Investors believing that the market is not efficient for the reason that buyers receive, perceive and evaluate information differently, causing the prices to deviate from their true value can look for undervalued stocks through diligent analysis. Going forward, this would enable them to outperform the benchmark of buying and holding the market. As backed by many studies it’s safe to assume that the market is often inefficient and therefore there are numerous ways of outperforming the market with your portfolio. Your excess returns can generally be 2 -6 percent at a risk free rate. Anything higher is most likely an abnormal return, which is the out-performance over the risk-adjusted return. Just beware, as this can also be a negative abnormal return. Nevertheless a small consistent excess return can also lead to great wealth [http://www.midasworldwide.com/wealth-creation.php].

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You CAN time the stock market. This tutorial shows you how to use a simple system that will tell you if you’re in a “Bull” or “Bear” market.

http://www.youtube.com/watch?v=3Tgh4zZCFDE&hl=en

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This is an advisory for beginners to learn and understand that trading has little to do with growing up wealthy, being college educated, or working on wall street and in order to “beat” the stock market has nothing to do with gambling, unnecessary risk taking, or hours and hours of study.

In fact, in order to understand a particular group of stocks and where they are going, you have to understand their past. That’s right the past!! Let me explain. People drive the stock market, correct? People have habits, correct? How many times have you went to the grocery store, a friends or families home or to work and always drove the same direction. Is there a certain time of the year that people buy more goods, for example Christmas? Is there a time of the year people save more, for example the weeks leading up to Christmas? Is there a time people drive more, that’s right you guessed it, Memorial Day weekend. Now if you’re outside of the U.S. reading this I still believe you get the point.

I think you know where I’m going but it gets a little deeper than that. There’s not just yearly patterns or habits but 5,10,20 year patterns in the market. Now I can’t teach you everything in this article especially since you’re still new to this whole idea. What I will do is tell you there are those that understand this and are wealthy because of it, oh let’s say 2-5% of the population that saw this bear market coming as early as 2000. Then there’s you and your friends and family. We were in the second highest bull market ever, only second to the bull market that ran us up to the great depression and bull markets last an average of 14 years so does the bear market which we’re now in. This bull market lasted from 1982 to about 2002 that’s only happened twice before lasting a period of 20 years.

What I can do for now, is tell you what stocks to pick, this way you don’t have to wait 15 years to get gains that beat inflation in your mutual fund. That way you can make it through this 15 year bear market of minimal gains. You can paper trade my picks, which I have a link to free paper trading for my members at my website, which undoubtedly will show you over time that there’s an art and pattern to the stock market.

I encourage you to start influencing yourself with people that are at the point that you’re still trying to reach. You’re within 5% of the income of your closest acquaintances and since you are here lets me know you don’t have friends in the upper 5% of the income bracket. Not a problem! That’s why you read books of those people like “Think and Grow Rich” by Napoleon Hill or “Slight Edge” by Jeff Olsen and make them your friends.

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Over the last year the current bear market that is taking place in stocks has left many stock traders facing relentless selling. For the beginner this experience has been made worse by not having the knowledge as to how the markets work and what they can do to protect themselves during the challenging economic times. While many are discouraged by this, the fact of the matter is that you can be able to protect yourself from the volatile market conditions and at the same time take advantage of the price irregularities that the markets will present the prudent stock trader with during the bear markets. This means using tactics that many beginning traders simply don’t know about or don’t understand such as:

Always use a sell stop: A sell stop is a sell order that is placed in advance, what happens is if the price of the stock hits a particular price which you determine in advance then it becomes a market order and you are out of the stock. The idea is to use this to protect you against buying something at high and then ridding it all the way down to the low. The biggest advantage that this has is you can set the sell stop at a particular point which could be a sign that the stock could be getting ready to go lower such as right below support (which is a major point that the stock stopped dropping previously and then reversed going higher). You can also adjust the sell stop upward to protect your profits and then when the stock does start to top out and go lower the sell stop will sell the stock leaving you in cash while it is going down, something that will help improve trading stock for beginners.

Buy after you see the follow through of a trend: A trend is when you see three consecutive points confirmed. What happens is many investors try to guess when the economy is going to turn around or if a company is going to beat their earnings based on what is happening in one quarter often leading to losses as they were just a little to early to get into the stock. What you want to do is see three consecutive quarters of better than expected numbers from a stock to confirm that they are in an earnings growth trend. When you are looking at any economic numbers you want to see three consecutive numbers in the same direction to confirm that a particular sector of the economy is expanding or contracting.

Clearly trading the markets during these challenging times can be very confusing for the beginning trader. To be able to successfully trade the volatile markets means that you must use tactics that will protect you as well as let you enter the stock at the right time such as: always use a sell stop and buy after you see the follow through of a trend will help you avoid the falling knifes, increasing your overall profits, helping you to be more successful at trading stock for beginners.

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DOLLAR VS GOLD STANDARD

http://www.youtube.com/watch?v=beQME8aV2e0&hl=en

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If you are a long-term investor in stocks, there is a very exciting investment plan. It is most suitable plan both for the beginners and veterans in stock market investments. Most of the investors, whether new or old, are constantly haunted by just one fear: As soon as you start investing in the stock market, the price of your stock will tumble and it will spiral up the moment you sell out your shares most probably, at a loss.

This is not just a phobia, an imagined fear. It is a very real cause to worry especially if you are trying to catch moves or time of the markets. Not only the lay investors, even the professional traders and fund managers also have a hard time gauging the wayward, volatile and unpredictable market moves. Since you are a long-term investor, you do not want to play this type of guessing game with your hard earned money. You want to be on a surer footing. You, therefore, want a strategy that is proven, conservative and delivers good value on your investment over the long run. This strategy is called Dollar Cost Investing.

This type of investment works on the premise that if you buy the stocks of the same dollar amounts on regular basis, the unpredictable fluctuations in investment is squared off over a certain period of time. You basically buy more stock when the prices are low and buy less when the market is high since you are always investing the same dollar amount. You do not have to worry about buying the shares on higher costs and selling them on low. This happens because the risk of the timing is reduced. All you need to do is to consistently invest the same dollar amount on regular basis. If you purchase index funds, your investment will grow with the market. Obviously you are more in tune with the market over the long term.

This plan can be illustrated by an example. Suppose you are not investing on the principle of dollar cost averaging. Instead, you are buying the same amounts of shares every month. You buy, say, 100 shares on the 15th of every month and you continue to buy stock at different prices for six months.

Suppose you buy 100 shares in the first month @ $30, second month@ $40, third month @ $50, fourth month @ $90, fifth month @ $ 60 and in sixth month @ $30.

Suppose your total investment over six months comes to be $ 30,000 and you buy 600 shares. Your average cost price per share would be $50.

Now suppose you buy your stock on the basis of dollar cost averaging. According to it, you spend the same amount that is, $ 30,000 spread over a period of six months so that you spend $5000 every month. Let us say you invest the same amount every month and buy 166.66 shares@ $30 in the first month, 125 shares @ $ 40 in the second month, 100 shares @ $50 in the third month, 55.55 shares @$90 in the fourth month, 83.33 shares @ $60 in the fifth month and 166.66 shares @ $ 30 in the sixth month. You buy a total of 697.2 shares for $30,000. If you divide $30,000 by 697.2, your average cost per shares comes to $43.02.

It is obvious that you have invested in fractional shares in the second investment plan. Your saving per share is huge although you are investing the same dollar amounts but buying shares fractionally. You actually buy more shares when the price is low and less shares when the price is high. You not only wind up with more shares, almost 700, at much less average price of $43 as against $50 in the first instance.

It must, however, be noted that it is much easier to make such purchases in a rising market when your investment appreciates. You have to be pretty much disciplined and stick to your strategy when the market is falling. You must also be aware of that each dollar buys more in a falling market, which potentially leads to higher gains in the future as the market recovers.

Although it is impossible to predict the market trends in the future, but historically, the market has risen over the long term and it takes the conservative investors right along with it.

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Before peeping into the cavernous ends of stock market trading and intricacies, trends and terminologies, it is of high relevance to get a rudimentary idea of stock market history. Speaking broadly, stock market is essentially a plot of business where the deal or buy and sell of the stocks or stock trades of companies happen. Stocks of the companies are essentially the shares of the company. Astonishingly, the stock market size would approximately come around 51 trillion dollars.

When discussions roam around the topic of stock market history, the beliefs and most relevant facts of the matter have to be pointed out. There were some implications that the credit for introducing this kind of a trade should be given to Italians. But historians suggest that this kind of a trade had performed by some Jewish as well as Muslim merchants in the early ages of 11th century in Cairo. That indicates they had their own methods for trading stocks. As a matter of fact, they pointed out that those merchants had proven their prowess in managing several different methods of payment.

Reliable historical pages also suggest the important role played by France in the early ages of 12th century. There were intermediaries who engaged themselves in manipulating or managing the agricultural related debts of people or group in a particular area. They performed their action as a mediator between the people and the bank. In the modern day context, they can be treated as stock broker.

Noticeable imprints can be found in the pages of stock trades about the handy role played by Venetian bankers in 13th century. They have done the stock trade in securities of government. Apart from that, 14th century, the bankers in Pisa, Florence etc marked the beginning of stock market trading in securities of government. Later, the joint stock companies were started by the Dutch people, which witnessed the continuing trend of earning the profit or loss in the business sector, in which the shareholders have invested.

As time passed by, Amsterdam Stock Exchange turned out to be as the stock exchange to deal with bonds and stocks. They have delivered a remarkable service in bringing the sanity in the early years of 16th century, as well as stock market trading is concerned. Later, stock trades have been done continually over the years by almost all the developed and developing countries where the United States leads from the front.

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http://www.youtube.com/watch?v=YeC7kXCw4II&hl=en

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Maybe you have done the same thing as I have. Been driving down an unfamiliar street at a good pace and suddenly been thrown into the air as the car hit a speed bump. You immediately slow down or even stop to put everything back together.

Kinda reminds me of trading in the stock market.

Going along nicely with a particular stocks or several positions when the market hits a “speedbump” and the bottom drops out. Suddenly you have a big loss instead of a profit. You pull over to the side of the road – quit puttting more money in the market. Better check to see what the damage is.

How much have you lost and is it still bleeding from that terrible bumps?

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